What Is a Typical Multifamily Deal Structure?

By Mark Kenney | Think Multifamily

If you’re diving into apartment syndication, understanding how deals are structured is foundational. You’ve heard of LPs and GPs—but how does the money flow, what are the legal structures, and where do the fees and returns land? Here’s a deep dive.

1. 💼 Legal Entity: Usually an LLC

Most syndications use a single-purpose LLC formed in the property’s state. Inside:

• Class A (LPs): Passive investor units
  

• Class B (GPs): Active operator units

This structure provides limited liability, simple tax treatment (pass-through), and flexibility in ownership roles.

2. 💸 Capital Stack: Equity + Debt

Every deal has two sides:

1. Equity (your money + other investors’)
   

2. Debt (a bank loan or bridge loan)

Equity is split between GPs and LPs based on investment proportion and agreed-upon profit share.

3. 🧩 Equity Structure: Preferred Return + Waterfall Splits

A. Preferred Return (Pref Return)

LPs commonly receive 6–10% annual returns before any profit goes to GPs 

B. Waterfall Distribution

Once the pref is met, profits “cascade” through tiers:

• Tier 1: LPs get their pref
  

• Tier 2: Remaining profits split (e.g., 70/30 or 80/20, LP/GP)
  

• Tier 4: Higher hurdle (e.g., after 15% IRR, split becomes 50/50) 

This aligns interests—GP only earns big if LPs do first.

4. 🏷️ GP Fees

GPs typically earn:

• Acquisition Fee: 2–5% of purchase price
  

• Asset Management Fee: 1–2% of collected revenue annually
  

• Disposition/Refinance Fees: When exiting or refinancing the deal

These fees fund the business side and incentivize performance.

5. 🧭 Common Deal Types

There are three core strategies:

1. Buy & Hold

   • Steady cash flow; low renovation
     

2. Value-Add

   • Improve the property, raise rents, boost equity
     

3. New Development

   • Ground-up builds (highest risk & reward)

Each type influences risk, returns, and deal structure.

6. 📊 Sample Deal Structure Summary

7. 🚨 Why It Matters

• LP Perspective: You want a deal paying pref + upside, with transparent waterfall tiers.
  

• GP Perspective: You need upfront fees for operations and a stake in overall profits.

A well-structured deal aligns both parties’ incentives, keeps everyone protected, and delivers clarity.

✅ Wrap-Up

In syndication, smart structures mean:

• Clear priority in payouts
  

• Alignment of GP & LP incentives
  

• Value transparency and risk sharing
  

• Balanced returns, legal protection, and tax benefits

That’s how a typical multifamily deal runs—and how we build trust with every one we offer.

👉 New to multifamily—or ready to finally connect the dots?
Start with our Ultimate Guide to Multifamily Investing—a complete overview to help you understand how apartment deals really work and how to get started the smart way.

It’s the perfect place to begin before diving into all our other resources.

🟦 Learn more about Multifamily Syndication Coaching.

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